Well that was the shortest shakeout I've ever seen. Markets pulled into 2550, found aggressive buyers, and then gapped higher on Friday due to the tax deal getting through the Senate.
My current line in the sand remains at the breakout above the main channel... that is at 2540, and it also coincides with the rising 20 day moving average. Unless we see price action back under that level, we must assume the trend remains higher.
The market is headed into earnings season and a lot of names are reporting in the next few weeks. The introduction of that volatility will help us identify the best stocks to trade, we just need to be a little patient and wait for those companies to release EPS.
Trade #1: ADBE
ADBE came out with earnings and absolutely smashed expectations. For a little context, they switched the pricing model around on many of their products to a monthly cost rather than a "one-off" event. I should know because I subscribe to a lot of their products now where previously I wouldn't want to drop a ton of cash on software I only use a few times.
The stock is now starting "post earnings announcement drift," a well known stock trading pattern. The odds of it reversing and losing all of its recent gains are low, because institutions who missed out are willing to "buy the dip." We want to do the same.
Trade Setup
Expected Price: 173
Sell to Open ADBE Dec 160/155 Put Spread
Tier 1: Enter at 0.65, Exit at 0.15
Tier 2: Enter at 0.95, Exit at 0.45
Tier 3: Enter at 1.25, Exit at 0.75